2011®

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“Extended Service Contracts and

Consumer Opinion”

Tara Piazza

VP, Customer Research

®Agenda

• Research Background• Recent Consumer Experiences with ESCs• Past Purchases and Claims Experiences• Social Media• Recap/ Questions

®Research Background

• Consumer survey conducted online in Feb 2011 by FULCRUM.

• 1,161 consumers who recently purchased a new product in one of the following categories, from a retailer, in the last six months:

• Digital home printers or copiers (n=200)• Digital cameras or camcorders (n=202)• Digital flat panel TVs or home theatre systems (n=206)• Home appliances (e.g. refrigerator, washer etc., n=202)• Power sports (e.g. motorcycles, ATVs, watercraft etc., n=151)• Automotive (n=200)

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IMPACT OF THE EXTENDED SERVICE CONTRACT ON PRODUCT PURCHASE

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Availability of an ESC is Important to Many Product Purchasers

Q: How important were each of the following when deciding which ______________ to purchase? A: Five point scale (1 = Not at all important, 5 = Extremely important) Summary of top 2 box scores shown here.

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Important Factors in Purchase Decisions

Digital home

printer/ copier

Camera or cam-corder

TV/ home

theatre

Home appli-ance

Power sports

Auto-motive

Getting a great deal on pricing 84% 88% 85% 85% 85% 91%

Manufacturer’s reputation for product quality 83% 84% 77% 84% 77% 88%

The specific item’s style and appeal to you 73% 80% 78% 74% 86% 83%

Reputation of the retailer for ongoing customer service

66% 57% 66% 78% 70% 77%

Past experience with the manufacturer’s products

70% 65% 51% 66% 66% 69%

Strong manufacturers’ warranty 57% 58% 58% 69% 67% 78%

Manufacturer’s reputation for financial stability

53% 51% 46% 60% 67% 72%

Availability of an extended service contract 42% 31% 35% 46% 46% 52%

Incentives (cash back, for example) 35% 30% 24% 42% 46% 58%

Availability of financing 27% 19% 19% 31% 54% 63%

Expected resale value 25% 20% 14% 18% 64% 60%

Availability of an ESC is Less Important than Price, Quality, Style

Q: How important were each of the following when deciding which ______________ to purchase? A: Five point scale (1 = Not at all important, 5 = Extremely important) Summary of top 2 box scores shown here.

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EXTENDED SERVICE CONTRACT PURCHASE INTEREST

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ESC Purchase Interest is Greatest for Vehicles and Home Appliances

Q: Did you buy an extended service contract for your new ________?

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Among the ESC-Interested, Post-Sale Efforts Best for Printers and Vehicles

Q: How willing would you have been, or will you be, to consider buying an extended service contract for your new at these various points in time? A: Five point scale (1 = Extremely unlikely, 5 = Extremely likely) Summary of top 2 box scores shown.Base: Respondents who have purchased, have plans to purchase or are undecided about purchase of ESCs for item.

Data labels hidden for clarity

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Items that would make an ESC more appealing

Digital home

printer/ copier

Camera or cam-corder

TV/ home

theatre

Home appli-ance

Power sports

Auto-motive

Free/discounted accessories, discounts on related products/events

46% 37% 34% 48% 58% 43%

Tied to product updates, upgrades 31% 29% 26% 27% 42% 27%

Adding ‘accidental damage and loss’ coverage 39% 51% 40% n/a n/a n/a

Tips on product maintenance, new product introductions communicated to you regularly

23% 19% 18% 23% 36% 20%

Inclusion of tech support 31% 35% 36% n/a n/a n/a

Inclusion of maintenance and service n/a n/a n/a n/a 47% 60%

None of the above 30% 29% 34% 40% 11% 20%

Each Product has Uniquely Appealing ESC “Value Adds”

Q: What would make an extended service contract for your ____________ more appealing to you? Multiple answers permitted.

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ESCs are Valued about 75% Higher if Cover All Repairs for Auto, ADH

Q: Assuming purchase near or at warranty expiration, what are you willing to pay for three years of… ? coverage of major repairs, full coverage of all repairs, full coverage of all repairs, including accidental damage that you cause.Base: Respondents who have purchased, have plans to purchase or are undecided about purchase of ESCs for item.

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Preference is OEM Parts, but More than Half are Open to Aftermarket

Q: How do you feel about the extended service contract being provided by the manufacturer (using OEM parts), versus by a third party (using aftermarket parts)?Base: Respondents who have purchased, have plans to purchase or are undecided about purchase of ESCs for item.

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NON-FINANCIAL BENEFITS OF ESCS

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Availability of an ESC Adds to the Consumer’s Sense of Security

Q: Does the fact that the manufacturer of your new _____________ offers an extended service contract make you feel…?

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ESC Availability Does Not Impact Sales Due to Quality Perception

Q: Does the offer of an extended service contract by the manufacturer cause you to have concerns about that brand’s quality?

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Customers Feel ESC Availability Extends Their Time of Ownership

Q: To what extent do you feel that having an extended service contract on your new _______________ will extend the amount of time that you own it before having to buy a new one?

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IMPACT OF PAST ESC EXPERIENCES ON BRAND LOYALTY

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Less than Half of Past ESC Purchasers Have Made a Claim

Q: Have you purchased any extended service contract, or extended warranty, in the past?If Yes, Q: Did you have to make a claim?

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Among the Past ESC Claim Makers, Most Experienced Good Outcomes

Q: Was the experience good, bad, or neutral?Base: Respondents who have made claims with extended service contracts or warranties in the past. (n=249)

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Good Claims Experience Increases Likelihood of Brand Repurchase (95%)

Q: How willing would you be to buy another product from that manufacturer again in the future?Base: Respondents who have purchased any extended service contract or extended warranty in the past.

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Good Claims Experience Increases Likelihood of Future ESC Purchase

Q: Would you purchase an ESC again?Base: Respondents who have purchased any extended service contract or extended warranty in the past.

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SOCIAL MEDIA BEHAVIOR, FROM THE CONSUMER’S PERSPECTIVE

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Compliments More Commonly Posted than Complaints

Q: Have you complained about a product’s performance online, in a user review or social media website?Q: Have you complimented a product’s performance online, in a user review or social media website?Base: Respondents who have purchased any extended service contract or extended warranty in the past.

Of consumers who post comments get a response

from the manufacturer

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What reasons might you become a “fan” or “friend” of a company online?

Digital home

printer/ copier

Camera or cam-corder

TV/ home

theatre

Home appli-ance

Power sports

Auto-motive

Quality/Reliable Product 42% 35% 31% 38% 36% 29%

Discounts/Coupons/Offers 25% 26% 23% 24% 23% 19%

Like the product 19% 13% 13% 11% 17% 13%

Customer Service 11% 11% 12% 10% 12% 11%

Updates/New features/products 5% 6% 3% 3% 7% 4%

None/would not become a fan 30% 29% 39% 30% 18% 31%

Customers Most Likely to “Fan” or “Friend” if Product is High Quality

Q: For what reasons might you choose to become a 'fan' or 'friend' of a company online? (Open end)Responses coded and tabulated into categories shown. Top categories shown here.

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RECAP/ QUESTIONS